TCL founder and chairman Li Dongsheng recently stated at a performance exchange meeting that the cyclical fluctuations in the panel industry will significantly weaken in the future. Compared to other enterprises, this impact on TCL Huaxing will be smaller, and the company has taken multiple measures to reduce the impact.

According to TCL (Group)'s newly released operating results for the first half of 2021, the company achieved an overall revenue of 115.2 billion yuan and a year-on-year increase of 460% in net profit.

Among them, TCL Technology achieved a revenue of 74.3 billion yuan, a year-on-year increase of 153%, and a net profit of 9.25 billion yuan, a year-on-year increase of 7.65 times. In the high-tech, asset heavy, and long-term track, semiconductor displays, semiconductor photovoltaics, and semiconductor materials have become important engines for their development.

TCL Industry focuses on intelligent terminals and builds AI × IoT's full scenario smart life achieved a revenue of 50.8 billion yuan, a year-on-year increase of 36%, and achieved a net profit of 3.35 billion yuan, a year-on-year increase of 294%. The continuous release of globalization strategic effects has formed a relatively complete global industrial layout and supply chain capabilities, with overseas sales revenue reaching 33.382 billion yuan, an increase of 41.2% compared to the same period last year. The business has spread to more than 160 countries and regions worldwide.

Industry development will bid farewell to strong cyclical fluctuations

Periodic changes are a pain in the semiconductor display industry.

Under the premise of stable demand, the investment in panel production capacity is significant and the construction cycle is long. Over a period of time, production capacity is concentrated and released, resulting in cyclical oversupply and strong cyclical characteristics of the industry. As the world's largest manufacturing base for display devices, China has experienced the longest and deepest downturn period. During this period, most shows that the profitability level of enterprises continues to shrink.

Starting from the second half of 2020, there have been new changes in the display industry. Under the influence of the "home economy" caused by the epidemic, the market for applications such as remote work, online services, and home entertainment has further expanded, and the demand centered business cycle has driven the rapid development of the industry. Driven by strong demand in the terminal market, the panel industry has experienced a one-year upward cycle, and semiconductor display companies have ushered in a period of high light. The domestic leader represented by TCL Technology has achieved a new historical high in performance.

Li Dongsheng pointed out that the innovative high performance is mainly based on the continuous improvement of external market demand and internal competitiveness. After the epidemic was brought under control, the global economy gradually recovered, and both semiconductor displays and semiconductor photovoltaic and semiconductor materials are in a period of rapid market demand growth.

Driven by this, both TCL Huaxing and Central Holdings have delivered impressive performance. TCL Huaxing has entered a comprehensive leading stage in terms of efficiency, products, technology, and ecology; Through continuous transformation and innovation, ultimate management efficiency, and global operational empowerment, the second growth curve - a new track for semiconductor photovoltaic and semiconductor materials business - has achieved significant results in the management of Zhonghuan Corporation.

For the future development of the semiconductor display industry, most industry insiders indicate that the cyclical weakening trend is clear due to the dual impact of improving industry supply and demand relations and the unchanged nature of the concentration of leading enterprises.

Regarding this, Li Dongsheng stated that from the perspective of the global panel pattern, as the concentration of the panel market increases, major industrial changes and new production capacity tend to be rational. In the past two years and the next one or two years, TCL Huaxing will also add some new production capacity, and some new production capacity will be added globally. But with the withdrawal of production capacity from South Korean enterprises, the overall growth rate of production capacity will not be as fast as in the previous two years, while demand continues to grow. It is unlikely that the supply and demand relationship will be balanced in the long term, and there will be periodic fluctuations, but the fluctuation amplitude will be significantly reduced.

This means that the semiconductor display industry will gradually shift from cyclical fluctuations to stable growth.

Enterprises take multiple measures to mitigate the impact of the cycle

At present, the panel industry is gradually moving from strong cyclical fluctuations to growth, but the prices of large-sized panels have rebounded in July and August, and the industry is concerned about the cyclical changes in the panel industry.

Li Dongsheng analyzed that from the current trend, the panel industry has experienced more than a year of positive economic growth, and the shortage of supply in the second half of the year will be alleviated. Compared to other companies, cyclical fluctuations will have a smaller impact on TCL Huaxing.

It is understood that in order to reduce the impact of cyclical fluctuations, TCL Huaxing has a combination of tactics to deal with cyclical fluctuations. Firstly, there is an orderly increase in production capacity. By accurately assessing market demand and trends, grasp the increase in production capacity; Secondly, optimize the layout of production lines, allocate the best and most efficient products for each production line, and continuously improve the efficiency of production line configuration; In addition, optimize the product structure and customer portfolio, increase the proportion of mid to high-end products, and increase the revenue proportion of non TV screens from 16% to 22%. With the replenishment of mid size production capacity, a full size business layout of large, medium, and small is formed, and the business and revenue structure is more balanced; Relying on the advantages of the supply chain, we will continue to explore leading global companies in color TV or display products, strengthen our customer portfolio, and improve the proportion of mid to high end products and comprehensive competitiveness.

In 2009, in order to strengthen its own industrial chain, TCL entered the semiconductor display industry and gradually established leading advantages in efficiency and scale effects; In 2020, by delisting from Zhonghuan Group and laying out the semiconductor photovoltaic and semiconductor materials tracks, the two core industries further collaborated and strengthened the global leading technology group strategy.

The outline of the 14th Five Year Plan of the country clearly proposes the goals of carbon peaking and carbon neutrality, and the clean energy industry has entered a period of rapid growth. On the first anniversary of the merger and acquisition of Zhonghuan Group, benefiting from multiple factors such as industrial policies and mixed reform empowerment, Zhonghuan Semiconductor achieved a revenue of 17.64 billion yuan in the first half of the year, a year-on-year increase of 104.1%, and a net profit of 1.89 billion yuan, a year-on-year increase of 160.6%. The goal of "doubling efficiency" for the whole year is within sight.

Regarding whether to carry out large-scale mergers and acquisitions, Li Dongsheng stated that winning a project is not only a matter of capital investment, but also a lot of integration work. Through institutional reform, Zhonghuan Semiconductor has achieved its phased goal of "doubling efficiency". Performance doubling is not only about scale, but also about efficiency. To achieve the above goals, significant management resources need to be invested.

At the semiconductor photovoltaic material end, Zhonghuan Semiconductor continues to promote the production and sales scale and product quality improvement of 210 products (210mm silicon wafers), collaborating with the upstream and downstream ecosystem of the industrial chain, effectively meeting the efficiency needs of the entire photovoltaic industry chain. The penetration rate of G12 silicon wafer market has increased from 6% at the beginning of the year to 15%.